Supreme Court Confirms 8-Year Prison Sentence for Former Real Owner of Club Arena in 50 Billion Won Tax Evasion Case

The former actual owner of the famous club 'Arena,' who was prosecuted for tax evasion amounting to 50 billion won, has been sentenced to a heavy prison term.

According to the legal community on the 22nd, the Supreme Court's First Division (Presiding Justice Oh Kyung-mi) upheld the original sentence of 8 years imprisonment and a fine of 54.4 billion won against Kang Mo, who was indicted on charges of violating the Act on the Aggravated Punishment of Specific Crimes (tax evasion), the Tax Offenses Punishment Act, and bribery involving a third party.

Arena Actual Owner (CG)

Im Mo, the former nominal representative of Arena who committed tax evasion crimes together with Kang, was sentenced to 3 years imprisonment and fined 22 billion won.

The court stated the reason for dismissing the appeal, saying, "There is no error affecting the judgment such as failing to conduct necessary hearings for the original judgment, violating the rules of logic and experience beyond the limits of free evaluation of evidence, misunderstanding the evidential value of electronic evidence, or misinterpreting legal principles related to 'co-entrepreneurs' or 'investment co-entrepreneurs' as defined in Article 43 of the Income Tax Act, 'supply value' in the Value-Added Tax Act, service charges excluded from 'entertainment food and beverage charges' in the Individual Consumption Tax Act, or 'taxable entertainment venues' as defined in the Individual Consumption Tax Act."

Kang was prosecuted on charges of evading a total of approximately 54 billion won in comprehensive income tax, value-added tax, and individual consumption tax (including education tax) from January 2010 to June 2019 while operating several entertainment bars and two clubs in the Sinsa-dong, Cheongdam-dong, and Nonhyeon-dong areas of Gangnam-gu, Seoul.

He was also charged with violating the Tax Offenses Punishment Act by registering businesses under other people's names, instructing a front man to appear on his behalf at investigative agencies (aiding and abetting a criminal), and bribing two police officers with 35 million won to cover up investigations. Im was charged with conspiring with Kang to commit tax evasion together.

Kang used various methods to evade taxes.

Knowing that entertainment bars must pay individual consumption tax including education tax in addition to comprehensive income tax and value-added tax, Kang registered the business as a general restaurant or Western-style bar to avoid paying individual consumption tax.

When reporting sales, he only declared credit card and cash receipt sales as bar sales, while separately keeping cash sales, thereby evading comprehensive income tax, value-added tax, and individual consumption tax.

Additionally, Kang falsely recorded performance bonuses paid to MDs (managing directors) responsible for club operations as service charges to evade taxes.

Although clubs are dance halls without entertainment hostesses and thus not subject to service charge payments, Kang exploited the fact that service charges paid by customers to entertainment hostesses at bars are not considered bar sales but are regarded as income of the hostesses.

Concerned that registering all entertainment bars he actually operated under his own name would increase comprehensive income tax due to progressive taxation, Kang dispersed business registrations under other people's names to evade taxes. He also falsely reported labor costs as necessary expenses when filing business income tax, even though no payments were made to front men or waiters.

The prosecution estimated that Kang evaded approximately 54.1934 billion won in taxes from January 2010 to June 2019 through these methods.

The first trial court found most of the charges against the two guilty, sentencing Kang to 9 years imprisonment and a fine of 55 billion won, and Im to 3 years imprisonment and a fine of 22 billion won. The total evaded tax amount recognized in the first trial was 54.1 billion won.

The appellate court reduced the evaded tax amount to 53.7 billion won, reflecting necessary expenses such as salaries.

Accordingly, Kang's sentence was reduced to 8 years imprisonment and a fine of 54.4 billion won in the appellate court, while Im's sentence remained unchanged.

Although both appealed, the Supreme Court dismissed the appeal, ruling that there was no error in the original judgment.

Arena was identified as the venue where Seungri (real name Lee Seung-hyun, 34), a former member of Big Bang, provided sexual favors to overseas investors during the 2019 'Burning Sun' scandal and was investigated. During this process, massive tax evasion and collusion with public officials were revealed, leading to the prosecution of Kang and other related parties.

This content was produced with the assistance of AI translation services.